Different people do financial anal y sis for different purposes, but the common purpose is to obtain information that is useful for their economic decisions from financial statements. This review involves identifying the following item The purpose of financial statements does not only provide the users to know how well or bad the entity financial position is, or how big or small the entity. Related Reading:Investing Principles Fundamental To Successful Outcomes, Invest With Confidence in Less Time  -  Manage Your Portfolio Without Behavioral Errors. They are: Creditors. Purpose of Financial Analysis. To examine efficiency of various business activities. The resulting ratio can be interpreted in a way that is not possible when interpreting the items alone. You may interest by checking here => Three elements of financial statements. The analysis of the balance sheet aid in the revelation of a company's financial position based on the figures found on the balance sheet. The profit or loss from the income statement will be reflected in the assets and liabilities of the balance sheet. Financial statements are used by shareholders, executives, employees, investors, potential lenders such as banks or vendors, and any other person or institution that needs … The purpose of financial statement analysis Financial statements purposefully serve the function of providing pertinent information in regards to a particular company. Financial statements are essential in order to find this information and the knowledge they contain pave the way for investors to do their own due diligence. There are a number of users of financial statement analysis. Income, balance, and cash flow statements are typically used to extract ratios that divulge information such as solvency, price to earnings and return on equity. The purpose of financial statements does not only provide the users to know how well or bad the entity financial position is, or how big or small the entity. 5. Changes in cash flow will be displayed in both the balance sheet and income statement and vice versa. Purpose of Financial Statement Analysis. Financial Statements are very important as it accurately reflects business performance and financial position of the company. They are also a vital part of creating plans for growth or even surviving a downturn in the economy. In other words, the process of determining financial strengths and weaknesses of the entity by establishing the strategic relationship between the items of the balance sheet, profit and loss account, and other financial statements. Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. Financial Ratios are mathematical assessments of financial statement accounts. What is the purpose of financial statement analysis? The purpose of financial statements. These three core statements … The purpose of financial statements is to provide pertinent information on the financial position (Balance Sheet), profitability (Income Statement) and operating, investing, and financing activities (Cash Flow Statement) of a company. Financial statement analysis is an exceptionally powerful tool for a variety of users of financial statements, each having different objectives in learning about the financial circumstances of the entity. There’s another important purpose of financial statements: small business financing. The Financial Statement Analysis and interpretation are basic to the decision-making process for creditors, stockholders, managers, and other groups. The process of reviewing and analyzing a company’s financial statements to make better economic decisions is called analysis of financial statements. But, the analysis is based on the information available in the financial statements. 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